Nikkei futures were pointing to a modest pullback after the cash index bounced 1.4 percent on Tuesday.

Economic data from the United States were too mixed to offer any lead. A closely watched housing survey showed home prices rose slightly more than expected in December, though February consumer confidence fell short of expectations. <TOP/CEN>

The Dow .DJI ended 0.17 percent lower, while the S&P 500 .SPX lost 0.13 percent, a day after touching a record high. MSCI's all world index .MIWD00000PUS inched up for the 13th session in 15 after touching its highest since December 2007.

Yields on 10-year U.S. Treasury notes dipped about 4 basis points to 2.70 percent, roughly in the middle of the recent 2.57 to 2.79 percent trading range.

Gold reached it highest in four months at $1,343.40 an ounce, before edging off to $1,339.69 in Asia.

In currencies, the yen was a shade firmer across the board as the dollar dipped to 102.20 from a top of 102.63 on Tuesday. The euro was steady at $1.3744 having been corralled in a $1.3685-$1.3773 range for the past six sessions.

Traders work on the floor of the New York Stock Exchange February 19, 2014. REUTERS/Brendan McDermid

CHINA PUZZLES

China's CSI300 index of leading Shanghai and Shenzhen A-share listings suffered its largest one-day loss in seven months on Tuesday, on renewed credit worries and a sharp drop in the yuan. The Shanghai Composite .SSEC lost 2 percent.

The retreat came as the People’s Bank of China engineered a vicious drop in the yuan. Dealers suspect China’s central bank is injecting more two-way volatility into the market while wrongfooting speculators that had amassed huge positions wagering on the continued rise of the currency.

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The Chinese currency has been a favorite among emerging market currencies in 2013, gaining nearly 3 percent even as most of its peers depreciated against the dollar. Most analysts expect it to appreciate another 2-3 percent this year, but the change in direction has rattled confidence.

However, some analysts believe the PBOC may be preparing the markets for more reforms.

“Putting such a warning shot over the bows of the FX community could also be seen as a sensible move ahead of any possible widening of the CNY’s trading band,” said Patrick Perret-Green, an analysts at Australia New Zealand Bank.

ANZ believes the band will be widened to 2 percent from the current 1 percent within the next couple of months, a move toward liberalization that should be seen as a positive step.

Yet he also cautioned that the weakness was not confined to the yuan and equities. Prices for copper and steel had fallen sharply while money markets rates were broadly lower, a risk-off shift that suggested growing worries about the economy.

“So far, the reaction of other global markets has been remarkably relaxed, if not perverse. It is questionable how long this can persist.”

In oil markets, Brent crude fell $1.05 to $109.59 a barrel, after touching its highest level this year. U.S. oil was up 22 cents at $102.05 per barrel in early Asian trade. <O/R>